Naira tilts toward N1,400/$ as U.S dollar gains strength amid global tension

The Nigerian naira remained near its key resistance level against the U.S. dollar during the second trading session of the week.

The pair is moving away from the extreme volatility seen in 2024–2025 as it enters a consolidation phase.

Currently, the fundamentals are mixed; buffers have noticeably improved, but structural headwinds remain.

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The naira settled at N1,399.07 to the dollar in the official market.

Market activity indicated that liquidity within the system remains healthy, as shown by slight fluctuations throughout the day.

The Central Bank of Nigeria (CBN) continues to emphasize the _“willing-buyer, willing-seller” _approach, which has helped keep the official rate for the week close to N1,400 and prevented volatile swings that could harm business planning.

US-Israel-Iran conflict enters new phase

According to the UK Maritime Trade Operations (UKMTO), projectiles have struck ships off the coast of Iran. This is the most recent of several incidents documented in or near the Strait of Hormuz.

• One of the ships was reportedly struck in the Strait of Hormuz, about 11 nautical miles north of Oman, leading to an onboard fire and the evacuation of the crew, according to the UKMTO.
• Two more incidents were reported on Wednesday morning. One ship was hit by a projectile about 50 nautical miles northwest of Dubai, while another vessel was damaged off the coast of the United Arab Emirates.
• The UKMTO advised ships in the area to exercise caution and report any suspicious activity while authorities continue their investigations.

Shipping across the strategically significant Strait of Hormuz has essentially ceased following the escalation involving the United States.

U.S. dollar gains momentum in global markets

The greenback gained strength toward the end of Tuesday’s trading session after losing ground for most of the day, as optimism about a potential ceasefire in the Middle East grew.

• The U.S. dollar had earlier declined after an initially strong start, influenced by increased volatility stemming from U.S.-Israeli coordinated airstrikes on Iran.
• Global financial markets earlier stabilized after comments from President Donald Trump helped ease some of the volatility, despite the airstrikes boosting the dollar and pushing oil prices to their highest levels since 2023.
• President Trump stated on Monday that the conflict might end sooner than expected, boosting investor confidence.
• He also warned that if Iran took actions that disrupted oil trading through the Strait of Hormuz, the United States would increase its military involvement in the Middle East.
• Comments from Iranian leaders subsequently eased tensions, calming investor concerns and leading to a significant decline in dollar purchases. This shift contributed to a nearly 15% drop in oil prices, although crude rebounded in the following trading session amid lingering fears tied to Iran’s defiant stance.
• As a result, demand for safe-haven assets increased, supporting renewed purchases of the U.S. dollar.

The recent surge in oil prices is unlikely to be reflected immediately, as markets are now entering the period for CPI data releases. The first signs may appear in the March inflation report.

Looking back at last month’s release, the U.S. year-on-year inflation rate fell to 2.4%, the lowest since May 2025, which markets interpreted as a potential trigger for rate cuts.

Market expectations currently peg U.S. headline inflation at 2.4% YoY, with core inflation steady at 2.5%.

The U.S. central bank is currently in a “quiet period” ahead of the Federal Reserve’s policy meeting on March 18, preventing officials from commenting on ongoing geopolitical tensions.

Without this silence, policymakers might have clarified whether the recent rise in energy prices is temporary or a sign of underlying issues that could threaten price stability.

Policymakers remain concerned that supply shocks could drive inflation higher.

Central banks may maintain their current interest rate path if they view the impact of the Middle East conflict on oil prices as temporary. Conversely, if they believe there is a real risk of entrenched inflation, they may need to consider higher interest rates for longer to keep market expectations in check.